June 22, 1999 | Backgrounder on Federal Budget
The House Appropriations Committee recommended spending $13.4 billion on discretionary transportation programs in fiscal year (FY) 2000. The Senate Appropriations Committee recommended spending $14.2 billion for these programs. Unfortunately, in order to stay within the tight spending caps imposed by the Balanced Budget Act (BBA) of 1997, Congress is poised to engage in another round of accounting gimmicks to give the appearance of exercising some measure of fiscal control without actually cutting spending. For example, on June 15, 1999, the House passed the Aviation Investment and Reform Act for the 21st Century (H.R. 1000, also known as AIR-21) by a vote of 316 to 110. This bill repeats last year's fiscal fiasco in the Transportation Efficiency Act (TEA-21)1 by placing billions of dollars in federal aviation spending forever beyond the reach of the appropriations committees.
This single act of budget trickery underscores Congress's inability to stick to spending limits. Although the House's FY 2000 transportation appropriation bill appears to stay within the budget Section 302(b) funding allocations, H.R. 1000 would remove any opportunity for real fiscal discipline because it would make many aviation programs mandatory and subject to neither spending caps nor an annual review process by Congress and the public, just as TEA-21 did for highway programs.
An example of hidden spending is the 4.6-mile extension of the Los Angeles subway in Hollywood, California. This ongoing project cost $1.74 billion ($378 million per mile) and includes museum-quality decorations.2 Its Vermont/Beverly Station resembles a theme park with an oversized rock formation jutting onto the street. The Hollywood/Vine Station is loaded with artifacts from the film industry, and the floor resembles the yellow brick road from The Wizard of Oz movie. The artwork cost an average of $320,000 per station, for a total estimated cost of $16 million.3 Residents in Los Angeles were disgusted with the wastefulness of this project and, in November 1998, voted to end local funding for the project.4 Next year, however, despite such local objections, the federal government will throw yet another $50 million in taxpayer money at this project.5 If an ongoing program like this slipped through, with an annual review process in place, then it is difficult to imagine the wasteful projects that could be funded in the future without any such review.
TEA-21 passed the House of Representatives by a vote of 297 to 86 and sailed through the Senate by a vote of 85 to 5, and was signed by President Bill Clinton within days. As a result, less than $14 billion of $50 billion in projected transportation spending will be subject to the appropriations process this year. TEA-21 requires Congress to spend the remaining $36 billion on highway and mass transit projects like the Hollywood subway. This week, the House of Representatives compounded last year's error by voting to take the aviation trust fund off budget. Proponents of making transportation programs mandatory and moving them off budget usually point to the highway and aviation trust funds as dedicated revenue sources that should not be raided to pay for general government programs. They rarely mention that removing these programs from annual review in the appropriations process makes it much easier to raid these accounts for low-priority home district pork-barrel projects. TEA-21 contains over 1,850 transportation earmarks spread over the six-year life of the legislation, or more than 300 projects per year.
Thanks to the recent House decision, which makes the growth of federal transportation spending even less accountable to the taxpayer, Congress must find real and significant savings in the discretionary programs that remain. Unfortunately, this year's transportation appropriation bill does not offer many other opportunities to find substantial savings. It is a lesson Congress will do well not to repeat if it is serious about restraining the growth of taxes and government.
Office of the Secretary of Transportation. Although the U.S. Department of Transportation is not nearly as top-heavy as most federal agencies, the Secretary's office employs an impressive public relations staff, including an Assistant for Public Affairs (at a salary range of $80,000-$104,000 annually), a Deputy Director of Public Affairs ($80,000-$104,000), and an Associate Director of Media Relations (over $68,000). The Secretary's personal staff includes a Chief of Staff (over $80,000), a Deputy Chief of Staff (over $80,000), three Special Assistants ($80,000-$104,000), a Special Assistant ($69,000-$89,000), a Special Assistant ($48,000-63,000), and several other administrative staff. Brookings Institution analyst Paul C. Light recently reported that last year
represented a banner year in the number of titles open for occupancy at the top of the federal hierarchy. Never has a president had so many layers of senior executives, whether political appointees or career civil servants, juxtaposed between him and the front lines of government. At the same time, never have fewer front-line employees actually delivered the goods for government.6
Congress should direct the Secretary of Transportation (and, indeed, all Cabinet members) to examine the department's organizational chart and identify positions and offices that could be consolidated or downgraded. Government officials should manage as well as corporate executives do, with only one or two executive assistants and otherwise ordinary or average assistants.
Additional potential limited savings in the Office of the Secretary of Transportation are shown in Table 1. A careful examination of these line items reveals that funding for the Office of the Secretary could be reduced to $5 million below the level recommended by the House Appropriations Committee and $2 million below the level recommended by the Senate Appropriations Committee.
A similar examination of funding levels for the Coast Guard and the FAA, which make up 85 percent of discretionary transportation spending, does not reveal the potential for larger savings than the appropriations committees already achieved. It should be noted, however, that both committees were highly critical of the FAA's inability to control operational costs and recommended lower spending in this area than President Clinton had requested.
Coast Guard. The appropriations committees of both the House and Senate recommended lower total Coast Guard funding levels than the President requested or than were appropriated in FY 1999. In FY 1998, the Coast Guard initiated the Integrated Deepwater Systems Project, a major acquisition of surface ships, aircraft, sensors, and communications equipment to conduct operations more than 50 miles off shore.7 Congress should direct the Coast Guard to report what savings might be achieved by utilizing ships, aircraft, and equipment recently decommissioned by the U.S. Navy as part of the defense drawdown.
FAA. The FAA is perennially criticized for its mismanagement of federal aviation programs. It is currently funded with revenues from the aviation trust fund, supplemented with appropriations from the general revenue fund. It is an on-budget account subject to the discretionary spending caps contained in the BBA. The FAA's authorization expired in 1996; since then, Congress has granted several temporary extensions while it tries to work out its differences on funding levels, both with President Clinton and between competing proposals. The main disagreements between the House and the Senate, and between Congress and the President, over reauthorization of the FAA concern how much to spend on aviation programs, the extent to which to supplement FAA spending out of the aviation trust fund with general revenues, and whether future aviation trust fund spending will be included in federal budget totals and subject to the caps.
In 1997, Heritage analysts recommended that Congress use FAA reauthorization to remove the Air Traffic Control (ATC) system from the Department of Transportation and restructure it as an independent government corporation as a transition to full privatization.8 These analysts pointed out that the "FAA's Air Traffic Control System has helped provide the American traveler with one of the safest forms of transportation," but that
management inefficiencies, congressional meddling, constraints on capital investments, and poorly conceived and implemented technological upgrades have forced the FAA to operate consistently below its potential for excellence and safety. Shifting the ATC to the private sector would give it the flexibility and resources needed to speed modernization of the entire system.9
The House chose instead to pass H.R. 1000. The primary effect of this legislation will be to hide FAA mismanagement in off-budget accounts and make it considerably more difficult for Congress to privatize the ATC system. Ultimately, this misguided decision to exempt FAA programs from annual review during the appropriations process very well may impair air safety as well the ability of Congress to control spending. Members of the House who find themselves unable to explain to their constituents the reason that America has obsolete ATC systems or that they cannot control federal spending have only themselves to blame.
The National Railroad Passenger Corporation (Amtrak) is the largest component of the Federal Railroad Administration's budget, representing 78 percent of total funding. The House Appropriations Committee noted that Amtrak is under congressional mandate to become operationally self-sufficient by 2003, and the Senate Appropriations Committee noted that
after October 2000, the Commission [Amtrak Reform Council, or ARC] must make a determination on whether or not Amtrak can meet the financial goals outlined in the ARAA [Amtrak Reform and Accountability Act of 1997]. If the ARC determines these goals cannot be met, they must then submit a restructuring plan, and Amtrak must submit a liquidation plan.10
Consequently, the Clinton Administration did not request operating subsidies for Amtrak in either FY 1999 or FY 2000.11 Capital grants have increased dramatically from FY 1998 levels, but this was anticipated as part of the overall effort to make Amtrak self-sufficient; and both the requested and recommended Amtrak capital funding levels for FY 2000 represent reductions of $38 million from FY 1999 appropriations. The House Appropriations Committee believes that
it will be possible--albeit difficult--for Amtrak to meet its Congressional mandate to become operationally self sufficient by 2003.12
Therefore, Congress should prepare to separate Amtrak from the Federal Railroad Administration and consolidate remaining Federal Railroad Administration functions--almost all of which relate to rail safety--inside an office of rail safety within the Office of the Secretary of Transportation. Regardless of whether Amtrak achieves self-sufficiency or is required to submit a liquidation plan, Congress has made clear its intention to wean it from federal subsidies by 2003. It will be easier to maintain that intention if Amtrak is treated as a separate agency and Congress recognizes that the remaining functions of the Federal Railroad Administration have little to do with rail safety and do not warrant a separate agency.
Table 2 shows the limited savings that could be achieved within the Federal Railroad Administration. A careful examination of these line items reveals that funding for the Federal Railroad Administration could be reduced to $5 million below the level recommended by the House Appropriations Committee and $2 million below the level recommended by the Senate Appropriations Committee. It should be noted that both committees recommended higher levels of funding for the Federal Railroad Administration than the Clinton Administration requested. In addition, both committees recommended combining the Office of the Administrator with the Rail Safety Office to reduce administrative overhead; they also recommended a funding level for the new operations and safety account that is nearly 11 percent more than the two offices spent separately.
St. Lawrence Seaway Development
The appropriations committees of both the House and Senate correctly rejected Clinton Administration proposals to redesignate the St. Lawrence Seaway Development Corporation as a mandatory account. The Senate went slightly further than the House and reduced the Seaway's funding by $546,000, and pointed out that
Since the 1999 navigation season opened on March 30, vessel traffic through the Saint Lawrence Seaway has declined by 20 percent and is projected to decline by 10 percent overall during the current navigation season. The Corporation has revised its tonnage forecast accordingly, thereby reducing its financial need.13
The House should follow the Senate's lead. Congress could go even further and emulate Canada's government, which privatized its portion of the St. Lawrence Seaway on October 2, 1998. Canada's Minister of Transportation, David Collenette, stated at the time:
This initiative will benefit all users by instilling more business discipline into the system, increasing productivity and enhancing its competitiveness. It will also minimize the requirement for future taxpayer support.14
Research and Special Programs
The House and Senate appropriations committees, correctly, both rejected funding for new positions within the RSPA's Department of Research and Technology. The Senate went slightly further than the House to freeze staffing levels throughout the RSPA at FY 1999 levels. The House should follow the Senate's lead.
The Department of Transportation requested $44.84 million to fund its OIG, which is the amount approved by the House Appropriations Committee. The Senate Appropriations Committee recommended $48 million for this account but gave no explanation for its recommendation for a higher funding level than the Clinton Administration had requested. The House Appropriations Committee's funding level is more responsible.
Table 3 shows the limited savings that could be achieved within these accounts. A careful examination of these line items reveals that funding for these programs should be reduced to $1.6 million below the level recommended by the House Appropriations Committee and $3.2 million below the level recommended by the Senate Appropriations Committee.
Architectural and Transportation
Barriers Compliance Board (ATBCB).
This program can and should be devolved to the states. Congress could save over $4.3 million by allowing the responsibilities of the ATBCB to be assumed by state and local governments. The House reported, "The activities of the Board include: ensuring compliance with the Architectural Barriers Act."15 State governments easily could assume its responsibilities.
The transportation appropriation bills are a case study of the ways in which Congress uses "mandatory" accounts to lock in increased spending and disguise the true cost of government. The House Appropriations Committee report points out that, although the committee was able to identify $60 million in savings from discretionary levels requested in President Clinton's budget, more than $33.8 billion is locked into mandatory accounts by TEA-21, which Congress passed last year, and the Federal Aviation Reauthorization Act of 1996.16 Congress is poised to repeat the same mistakes by taking appropriations from the aviation trust fund off budget.
TEA-21 made the following programs largely mandatory. Consequently, an examination of these accounts does not reveal the potential for larger savings than those the appropriations committees already have achieved:
If Congress had not tied its own hands by designating most transportation spending as mandatory, it would be able to identify substantial savings in these accounts. For example, the EAS and Rural Airport Improvement Grant Program provides up to $50 million directly to commuter/regional airlines to provide service to small communities that otherwise would not receive such air service.17 This single line item could be reduced by $37.9 million simply by restricting subsidy payments to communities in Alaska, where small air service often really is a matter of life and death, and to communities in the "lower 48" states that are more that 150 miles from a hub airport and support more than 10 passengers a day. Sixty of the 74 communities in states outside Alaska that receive EAS grants are either within 150 miles of a hub airport or serve fewer than 10 passengers a day. None of the airports serves more than 40 passengers a day. The Mount Vernon, Illinois, community airport, which is 92 miles from St. Louis International Airport, serves 1.3 passengers per day.18
A major reason there is little or no demand for the services of these airports is that, even with federal subsidies, it is prohibitively expensive to use them. A round-trip ticket from Mt. Vernon, Illinois, to Reagan National Airport in Washington, D.C., costs $1,195.19 The same ticket costs $396 from St. Louis, a savings of $800. If Congress had not designated the EAS as a mandatory program, it would be able to make better use of $37.9 million currently wasted on services that rarely are used.
The mandatory designation also robs Congress of the opportunity to recover $145.9 million in unused mass transit grant funding. The Senate Appropriations Committee report states that 45 communities have not spent the grants given to them almost three years ago and will lose the authority to spend this money on September 20, 1999.20 Unfortunately, these funds will not become available to reduce overall federal spending or protect the Social Security trust fund; they must be reallocated to new transit pork-barrel projects from a list prepared during passage of TEA-21.
TEA-21 locked Congress into spending $28.9 billion on surface transportation projects--$1.5 billion more than was appropriated for FY 1999.21 This includes funding for such "national priorities" as bicycle access improvements in Arlington County, Virginia ($1 million);22 and White Plains, New York, "transcenter" pedestrian improvements ($2 million).23 Citizens Against Government Waste, a watchdog group based in Washington, D.C., estimates that the FY 1999 transportation appropriation bill, which was subject to the normal appropriations process, contains $1.2 billion in special interest highway and transit projects.24 An examination and comparison of the House and Senate reports accompanying their appropriation bills for FY 2000 indicates that, today, the pork is mandatory and hidden even deeper. The current appropriations bills on transportation prove the predictions that the enactment of TEA-21 would make it more difficult to rein in federal spending and mislead the public about the overall size of government.
Congress can, and should, restrain federal spending on transportation programs by reestablishing distinctions between national and local roles, responsibilities, and priorities. The national highway system envisioned by President Dwight D. Eisenhower in the 1950s is largely completed and could be maintained by local departments of transportation. Most mass transit systems serve local metropolitan areas using existing infrastructure. Airport operations could be handled by the private sector, which already has taken over most commercially viable railroad operations. Yet Congress, through TEA-21 and now AIR-21, has put in place many procedural hurdles that will make the possibility of making such changes even more remote.
Congress cannot protect Social Security and stop the growth of federal government and taxes if it engages in budget chicanery to mask the true size of government. The U.S. Department of Transportation funds many programs that have fulfilled their original purposes and no longer are needed, others that make a culture of costly management deficiencies, and still more in which the federal government should not be involved. The transportation appropriation bills now before Congress offer a good opportunity to stop wasting taxpayers' dollars in these ways. Eliminating obsolete programs, removing the federal government from doing things that the private sector could do better, and shrinking or eliminating agencies or programs that suffer from chronic mismanagement are good avenues to take. Perhaps most important, Congress must stop removing more federal transportation programs from the democratic process of public scrutiny and accountability by taking various funding proposals out of the annual appropriations debate.
2. Information from the Office of Representative Tom Coburn (R-OK), Washington, D.C., June 16, 1999. See also Jeffrey L. Rabin, "Hollywood Subway Line Opens Today," The Los Angeles Times, June 12, 1999, and Eddie Rivera, "Hollywood Debut," Los Angeles Downtown News, May 10, 1999.
7. U.S. Senate, Committee on Appropriations, S.R. 106-55, Report to Accompany S. 1143, Department of Transportation and Related Agencies Appropriations Bill, 2000, 106th Cong., 1st Sess., May 27, 1999, p. 37.
12. U.S. House of Representatives, Committee on Appropriations, H.R. 106, Report to Accompany H.R. (unnumbered) A Bill Making Appropriations for the Department of Transportation and Related Agencies, June 1999, p. 110.